87

IN THE CONSTITUTIONAL COURT OF SOUTH AFRICA

CCT Case No. 161/16

CCT Case No. 103/2010

In the matter between:

TERRY CRAWFORD-BROWNE

Applicant

and

THE PRESIDENT OF SOUTH AFRICA

First Respondent

THE MINISTER OF JUSTICE AND Second Respondent

CONSTITUTIONAL AFFAIRS

ARMS PROCUREMENT COMMISSION Third Respondent

c/o the Second Respondent

THE MINISTER OF FINANCE

Fourth Respondent

THE MINISTER OF DEFENCE

Fifth Respondent

THE MINISTER OF TRADE AND INDUSTRY Sixth Respondent

THE MINISTER OF PUBLIC ENTERPRISES

Seventh Respondent

FOUNDING AFFIDAVIT

Background:

1.In October 2010 in the public interest, I filed application CCT 103/2010 in this honourable court. I am a retired international banking specialist, and was previously employed by Nedbank as Regional Treasury Manager for the Western Cape. I am resident at E105 Sandown Crescent, Royal Ascot, Milnerton, Cape Town.

2.I resigned from Nedbank in 1986 having, with (then) Bishop Desmond Tutu, Dr Beyers Naude and the South African Council of Churches, in October 1985 launched the international banking sanctions campaign at the United Nations in New York. Given the political turbulence of that period, this was a nonviolent initiative to avert a civil war and anticipated racial “bloodbath” in South Africa. As the result of Archbishop Tutu’s networking in mobilising a wide spectrum of public opinion in the United States against apartheid, including passage of the 1986 Comprehensive Anti-Apartheid Act, the successful banking sanctions campaign is now widely acknowledged as the “tipping point” in South Africa’s relatively peaceful transformation from apartheid to constitutional democracy. It was in this context that President FW de Klerk in February 1990 announced the release of Mr Nelson Mandela and began constitutional negotiations.

3.Two months after the transition in 1994, Armscor was caught red-handed selling AK-47s, ammunition and other military equipment to Croatia in violation of the United Nations arms embargo against former Yugoslavia. President Nelson Mandela appointed (then acting) Judge Edwin Cameron to chair the Cameron Commission of Inquiry into Armscor. Archbishop Tutu appointed me to represent the Anglican Church at the Cameron Commission. The essence of the Cameron Commission report was that Armscor was both incompetent and corrupt.

4.The position of the Church was to demand disbandment of Armscor and Denel as heavily-subsidised apartheid-era entities, conversion of their assets to peaceful purposes, and a total prohibition on exports of armaments from South Africa. Regrettably, and despite the Cameron Commission findings of incompetence and corruption, Armscor was not disbanded and it continues to trumpet its purported expertise in negotiating offset contracts. The consequences continue to haunt South Africa more than twenty years later because of the corruption unleashed by the arms deal offset contracts.

5.Given this background, I was appointed by Archbishop Njongonkulu Ndungane to represent the Anglican Church during the 1996-1998 Defence Review conducted in Parliament. The 1996 Defence White Paper acknowledged that there was no conceivable foreign military threat to South Africa. Accordingly, the position of the Church during the Review was that poverty alleviation was post-apartheid South Africa’s socio-economic and security priority. (Archbishop Ndungane succeeded Archbishop Tutu as Anglican Archbishop of Cape Town in 1996).

6.Amongst the issues debated at the Review was the proposition that offsets would stimulate South Africa’s economic development. Given my experience in international banking with Nedbank, I was already well acquainted with the international reputation of offsets for fraud and corruption, and repeatedly warned all government ministers of that notoriety. Regrettably, those warnings were ignored.

7.Resulting from allegations within Parliament of bribery and corruption, Archbishop Ndungane in August 1999 called for a commission of inquiry to investigate the proposed arms deal, with particular focus to be given to offsets. His call for a commission of inquiry preceded the “Memorandum to Patricia de Lille, MP from Concerned ANC MPs” a month later, which sparked the arms deal scandal.

8.The leader of those “concerned ANC MPs” was Ms Winnie Madikizela-Mandela. The main “whistleblower” was the late Mr Hassan Solomon (otherwise known as Bheki Jacobs). Jacobs was an ANC intelligence operative who had been trained in the Soviet Union and who, after his return to South Africa in 1994, worked under Deputy President Thabo Mbeki at Shell House in Johannesburg. In my opinion as well as in the opinion of many prominent journalists, his intelligence gathering skills could be compared with those of Julian Assange and/or Edward Snowden.

9.When Jacobs approached me in June 1999, he explained that the arms deal itself was just the tip of a corruption iceberg that also involved oil deals, the taxi recapitalisation process, toll roads, drivers’ licences, Cell C, the Coega development outside Port Elizabeth, diamond and drug smuggling, weapons trafficking and money laundering. Jacobs was also involved in gathering intelligence information on the activities of Brett Kebble, Jackie Selebi, Glenn Agliotti, Radovan Krejir, Vito Palazzolo and others involved in organised crime. Jacobs and President Mbeki apparently “parted company” because of the arms deal.

10.Jacobs alleged that the common denominator in these transactions was kickbacks to the African National Congress (ANC) in return for political protection. The driver of this criminality was said to be the Minister of Defence, Joe Modise in his capacity as the leader of Umkhonto-we-Sizwe. Placed in the context of the just-released Chilcot report in Britain on the role of Prime Minister Tony Blair in the “war on Iraq,” these issues will be addressed in the closing paragraphs of this affidavit.

11.Amongst the documents appended with application CCT103/2010 were 160 pages of affidavits by Mr Johan du Plooy of the Scorpions and Mr Gary Murphy of the British Serious Fraud Office. These detail how and why BAE paid bribes of £115 million (R2 billion) to secure its arms deal contracts with South Africa, to whom the bribes were paid and which bank accounts in South Africa and elsewhere were credited. In addition, the Sunday Times reported in August 2008 that the investigative organisation Control Risks had found that Ferrostaal on behalf of the German Submarine Consortium paid a bribe of R30 million to President Mbeki, of which he paid R2 million to Deputy President Jacob Zuma and the balance of R28 million to the ANC. As will be traversed later, kickbacks from arms deal companies were alleged to have funded the ANC’s 1999 election campaign.

a) CCT103/2010, Rule 18 (2) and 18 (1):

Exclusive Jurisdiction and Direct Access:

12.The essence of application CCT103/2010 was that given a massive volume of evidence against the suppliers of the strategic arms procurement package (colloquially known as the arms deal) -- specifically BAE (British Aerospace), the German Submarine Consortium (GSC) and the German Frigate Consortium (GFC) -- it was irrational and therefore unconstitutional for the President of the Republic to refuse to appoint a commission of inquiry into allegations of corruption and malfeasance surrounding the arms deal.

13.The matter was brought at that time in terms of rule 18 (2) of the Constitutional Court and section 167 (4) (e) regarding exclusive access because the President’s powers and functions in terms of section 84 (2)(f) of the Constitution include the appointment of commissions of inquiry.

14.Some 2 000 pages of documents were submitted with CCT 103/2010, and I request the Court again to take judicial note that the matter followed acknowledgement in Parliament that the “Hawks” had inherited from the “Scorpions” 460 boxes and 4.7 million computer pages of evidence against BAE, plus also the evidence against the GSC and GFC.

15.The “Hawk” case numbers of these three investigations were:

CAS 914/11/2009, CAS 915/11/2009 and CAS 916/11/2009. It was argued in papers and orally that, given the huge volume of evidence, it was irrational and therefore unconstitutional for the President to refuse to appoint a commission of inquiry to consider public allegations of corruption and malfeasance.

16.The matter was heard by this honourable court in May 2011. When legal counsel for the First Respondent could not or, alternatively, would rebut the existence of this massive volume of evidence, the First Respondent was given a postponement until 1 July 2011 to deal with the substance of the matter. The First Respondent was then given a second postponement until 15 September 2011.

17.The First Respondent then publicly announced that in response to case CCT103/10 that I had brought against him that he would appoint a commission of inquiry and that he would pay my legal costs.

18.The Commission’s terms of reference were published in October 2011 and, against public assurances by the Second Defendant on

behalf of the First Defendant of an open and transparent investigation, I agreed in good faith to withdraw application CCT103/10.

19.This withdrawal was accomplished with this honourable court’s agreement in November 2011. Given that this new application is a direct consequence of case CCT 103/2010, it is in the interest of justice that I am allowed direct access to the Court in terms of rule 18 (1). The matter is brought in the public interest because massive fraud has been perpetrated against the people of South Africa.

20.The Arms Procurement Commission (Third Defendant) was allocated a budget of R40 million, and was charged to complete its work within two years. In fact, it took over four years, and spent R137 million in public resources.

21.I submit that as a body created by the President as a consequence of my application CCT103/2010, the Commission deliberately failed over a four year period to comply with sections 2 and 237 of the Constitution, and purposefully thwarted the course of justice.

22.In addition, I submit that in terms of sections 167 (4) (e), 167 (5) and 167 (7) the Constitutional Court has exclusive jurisdiction in matters of constitutional misconduct by the President and the Arms Procurement Commission as a body created by him to advise him according to the terms of reference established in October 2011.

23.The Commission’s report was delivered to the First Respondent on 30 December 2015. The report comprises three volumes amounting to 737 pages. The First Respondent released the report to the public on 21 April 2016 and, in summary of its findings, declared that the Commission had found:

23.1“On the rationale for the package, the Commission found that it was necessary for the South African National Defence Force to acquire the equipment it procured in order to carry out its constitutional mandate and international obligations of peace support and peacekeeping.

23.2On the question of whether the arms and equipment acquired

are underutilised or not utilised at all, the Commission found

that all the arms and equipment acquired are well-utilised.

23.3On whether the job opportunities anticipated to flow from

the Package have materialised, the Commission indicated

that the projected number of jobs to be created through the

arms procurement process was achieved. The Commission

states that the probabilities are that the number of jobs

created or retained would be higher than 11 916.

23.4On whether the offsets anticipated to flow from the arms procurement have materialised, the Commission found that it was fair to conclude that the anticipated offsets have substantially materialised. Adequate arrangements are in place to ensure that those who have not met their obligations do so in the immediate future.

23.5On whether any person or persons improperly influenced the

award or conclusion of any of the contracts in the procurement process, the Commission found that the evidence presented before it does not suggest that undue or improper influence played any role in the selection of the preferred bidders, which ultimately entered into contracts with the Government.

23.6On whether any contract concluded through the procurement process is tainted by fraud or corruption, the Commission states that the widespread allegations of bribery, corruption and fraud in the arms procurement process, especially inrelation to the selection of the preferred bidders and costs, have found no support or corroboration in the evidence, oral or documentary, placed before the Commission.

23.7Government had been of the view that any finding pointing

to wrongdoing should be given to law enforcement agencies

for further action. There are no such findings and the

Commission does not make any recommendations.”

24.Accordingly, I request the court to take judicial notice of the Commission’s report but, in particular, of paragraphs 35 and 36 on pages 25 and 26 pertaining to National Treasury, which state:

24.1“The Department of Finance (now the National Treasury) was one of the four national government departments that were represented in the IMC [inter-ministerial committee] by the then Minister of Finance, Mr Trevor Manuel. As a result of its involvement in the procurement process, it amassed a large volume of documentation on the SDPP, which, depending on the nature of the documents, are divided up amongst its Legal Services, Public Finance and Asset and Liability Management Divisions and the Office of the Accountant-General. The information in the custody of the National Treasury relates primarily to the financing of the SDPP, the formulation of the budget and the manner in which the expenditure was reflected in the Defence budget. It includes the following documents which the National Treasury provided to the Commission:

· The arms procurement loan agreements that were entered into and signed off on 25 January 2000 between the Department of Finance as the borrower and four international banks as the lenders:

· Barclays Bank PLC

· AKA Commerzbank

· French Buyer Credit Agreement (Société Générale)

· Mediocredito Centrale SpA

· The document entitled ‘Affordability of the Defence Strategic Armaments Packages: An Assessment of their economic, fiscal and financial impacts’ (August 1999).

24.2The Commission enquired from the National Treasury how it should handle and deal with confidential documents provided to the Commission. The National Treasury pointed out that the documents were given to the investigators of the Commission for their exclusive use and to assist theCommission in its work and not for public distribution.

24.3It pointed out that the documents were privileged and that this privilege was recognised by a full bench of the Cape High Court in the case of ECAAR South Africa v President of the RSA and others (case no 5129/2002 of 26 March 2003. It stated that only the Commission had a right to have sight of and to ask questions on these documents. Given the privileged nature of the documents, the National Treasury requested that any hearings pertaining to the documents be held in camera. In the event it was not necessary for the Commission to go in camera in relation to those documents.”

25.As the applicant in case 5129/2002 brought in the Cape High Court for discovery of documents, I bring it to the attention of this honourable court that the statement by National Treasury and recorded by the Commission that the documents are “privileged” is false.

26. Contrary to the claim that the Cape High Court recognised the privilege of these documents, that court on 26 March 2003 awarded me discovery “within ten days of the documents containing the advice of the International Offers Negotiating Team And Financial Working Group.”

27.In awarding me the discovery of these documents, that court had rejected arguments furnished in an answering affidavit submitted by the Director General: National Treasury on behalf of the minister of Finance that:

“The loan agreements set out the terms and conditions upon which the Republic of South Africa, acting through its Department of Finance (as it was known) was able to raise monies by way of advances. Detailed provisions relate to advances; commitments, optional currencies and interest capitalization advances; interest; prepayments and repayments and covenants of various kinds. Exposure of the content of these arrangements would, in the considered view of the Second Respondent and National Treasury, be contrary to the public interest. The transactions in question are part of the financial business carried on by the Government and the terms and conditions upon which it does so ought not to fall within the public domain. I therefore record an objection by the Second Respondent to the disclosure of these documents as contrary to the public interest and further by reference to the confidential nature of the material in question.”

28.Despite the Cape High Court’s rejection of their argument, the [then] Minister of Finance and [then] Director General: National Treasury continued to frustrate the discovery order -- notwithstanding two applications by me against them for contempt of court.

29.The second application for a contempt of court judgement yielded 224 pages of documents in November 2003, namely the 57 page affordability study and some annexures. On examination of these documents, I emailed my attorney as follows:

“The documents received yesterday are very uneven and

incomplete. Of 224 pages, 51 relate to three steel projects. The opening paragraph says South Africa doesn’t need another steel mill. After comparison with chapters 8 and 9 of the JIT report, it is evident that we’ve only got part of the IONT and financial working group documents. The Cabinet most certainly did not approve of the arms deal on the basis of the documents we’ve got, given the repeated and unambiguous warnings they contain about the risks involved. If they did, they most certainly did ‘not apply their minds.’ Having ignored these warnings and signed the loan agreements, Manuel should be facing criminal charges.”

30.The International Offers Negotiating Team was appointed by Deputy President Thabo Mbeki in November 1998 and the affordability Team in March 1999. Their functions were to negotiate financial and other arrangements for the arms deal, including offsets.

31.The work and advice of the two teams amounted to several thousand pages of documents, and was distilled into the 57 page affordability study provided to the Cabinet in August 1999.

32.I was subpoenaed to testify before the Commission. In terms of that subpoena, I was entitled to examine documentation essential to my testimony. Accordingly, I demanded sight of the IONT and Financial Working Group papers, and my evidence leader, Advocate Barry Skinner SC, undertook to obtain them.

33.These documents are described in chapters eight and nine of the 2001 report by Joint Investigation Team (JIT Report) into the arms deal as “voluminous” and “highly professional.” Much of the approximately 2 000 pages of documentation filed with case CCT 103/2010 referred to that report. Although its executive summary purportedly and contentiously exonerated the government from any wrongdoing, the report itself found that every arms deal contract was seriously flawed by tendering irregularities.

34.In terms of the subpoena arrangements and on advice in late February 2013 by Advocate Skinner that the IONT and Financial Working Group documents were now available for examination, I flew with my legal team from Cape Town to the Commission’s offices to examine the documents.

35.About an hour before our arrival in Pretoria, the Commission’s Advocate Fanyana Mdumbe arbitrarily withdrew authority to examine the documents. Only when the Commission was threatened with immediate action in the North Gauteng High Court was that authority reinstated.

36.What was purported to be the IONT and Financial Working Group documents were contained in nine lever arch files. They were in a complete mess, and were mainly unrelated to the IONT and Financial Working Group papers.

37.I wrote to the Commission’s Chairperson on 27 February 2013 informing him:

“The documents…are not indexed and properly legibly sequentially paginated. They are disorganised, repetitively copied, and sometimes so badly copied as to be illegible. Surely the APC’s documents ought to be electronically organised? My evidence leaders do not even know the system according to which they are organised and categorised. Does one exist? The documents seen so far confirm, nonetheless, that the Cabinet ministers were amply warned in August 1999 by the“affordability team” of the risks associated with the arms deal. Recklessly, or at least without regard to the requirements of C217 (1), the government chose to ignore those warnings.”

38.Over the course of the next eighteen months and in terms of the subpoena, I repeatedly demanded sight of the IONT and Financial Working Group papers.

39.I was in due course able to estimate from the pagination on documents submitted to the Commission by the former head of the IONT committee, Mr Jayendra Naidoo, that these documents comprised about 17 000 pages. In his testimony before the Commission, Mr Naidoo also referred to “the blue file.”

40.A figure of 17 000 pages would conform to both the JIT report description as “voluminous” and to National Treasury’s confirmation (per paragraph 24.1 above) that “it amassed a large volume of documentation.”

41.I brought my findings to Advocate Mdumbe’s attention. He agreed with my expectation of about 17 000 pages. He then informed me, albeit probably inadvertently, that the Commission already held the documents.

42.To verify and confirm that information, I then asked Advocate Mdumbe whether the Commission had the documents. He replied “yes.” As set out in paragraph 24 above, the Commission’s report also confirms that the Commission had the IONT and Financial Working Group papers in its possession.

43.Despite Advocate Mdumbe’s belated acknowledgement that the documents were actually in the Commission’s possession, it was also evident from his demeanour that the documents would still not be made available to me. He was known amongst the media and others (and per my earlier experience in February 2013) as “Judge Seriti’s hatchet-man.”

44. I therefore did not pursue the matter. There was no point in doing so, given the allegation contained in Mr Norman Moabi’s resignation letter in January 2013 that “Judge Seriti was pursuing a second agenda to silence the Terry Crawford-Brownes of this world.”

45.That reality again became evident when I attempted to cross-examine the former Minister of Finance, Mr Manuel in June 2014.

Most of the eighty-six questions I proposed to ask Mr Manuel were disallowed by the Commission’s Chairperson, Judge Seriti.

46.The reasons are now revealed in paragraph 36 of the Commission’s report, as noted in paragraph 24.3 above, that the Commission was deliberately colluding with National Treasury to block investigation of the IONT and Financial Working Group papers, and together had invented the spurious excuse that the documents were “privileged.”

47.The reason why National Treasury has blocked investigation of those documents is now evident but, in the interests of justice, the people of South Africa are entitled to demand why the warnings contained in the 1999 affordability study and analysed in the documents were disregarded by the Cabinet.

48.The arms deal predictably unleashed a culture of corruption that now threatens survival of South Africa’s constitutional democracy. The further consequences have included massive increases in unemployment, the collapse of the rand on foreign exchange markets, widening of the gap between rich and poor, daily service delivery riots throughout the country, and the prospect of South Africa’s investment downgrading to junk status – a prospect that will further aggravate the country’s poverty crises.

49.Further illustrating the Commission’s irrational mismanagement of documentation, the huge volume of documentation that was the subject of my case CCT103/2010 before this honourable court in 2011 was simply left in two shipping containers at the “Hawks” premises in Pretoria.

50.Following revelations by City Press newspaper, this was confirmed by the Commission’s media statement in August 2013 stating:

“The Commission is fully aware of these documents. The reasons why we have not collected and analyzed them are, firstly, that we do not have sufficient safe storage facilities and, secondly, the state in which the documents are, where there are no indexes etc. The documents needed to be scanned and reduced to electronic format. We can confirm that we took possession of some of these documents precisely because they were in hard drives….

The Commission then had to decide whether to embark on a time consuming and costly exercise of scanning documents which may turn out to be of no use to the Commission or to rather lead the evidence of the relevant officers who would be better placed to know which of the documents are relevant, and would be able to refer to them. We chose the latter course.”

51.As referred to in paragraphs 12-20 above, this huge volume of evidence against the German Submarine Consortium, German Frigate Consortium and BAE was the very cause of the Commission’s creation.

52.I have been informed that given this volume of documentation, the cost of scanning and indexing would have been about R250 000.

53.Thus, in order to save an estimated R250 000, the Commission irrationally squandered R137 million of public resources, grossly overrunning its budget and wasting four years.

54.In so doing, the Commission violated the basic values and principles governing public administration as set out in section 195 (1) and (2).

b) Setting Aside the Arms Procurement Commission Report:

55.The Commission was charged with six terms of reference, the first being the “rationale” for the acquisitions.

56.As quoted in paragraph 23.1 above, the President reported on 21

April 2016 that the “rationale” for the package was to reequip the SANDF to acquire the equipment it procured in order to carry out its constitutional mandate and international obligations of peace support and peacekeeping.

57.I submit to the court that this is, in fact, also false. It is a fallacy and “red herring” that was deliberately introduced to divert attention from the real motivations for the arms deal, namely that R30 billion spent on armaments would purportedly generate R110 billion in offsets and create 65 000 jobs, and to deviate from the Commission’s terms of reference.

58.Yet in further pursuit of this “red herring,” senior Navy and Air Force officers were paraded before the Commission to testify about the need for the equipment, albeit many of their testimonies contradicted what some of them had previously told Parliamentary committees including, as reported in 23.2 above, “that all the arms and equipment acquired are well-utilised.”

59.This finding by the Commission has also been contradicted by no less than the current Minister of Defence, who confirmed in Parliament that at least 12 of the 26 BAE/SAAB Gripen fighter aircraft are in long-term storage because of a lack of funding. (“A Dozen SAAF Gripens In Long Term Storage,” Defenceweb, 13 March 2013).

60.In the assessment in 2000 of officials at the German Embassy in Cape Town, South Africa lacked the expertise to maintain the highly sophisticated frigates and submarines, which they told me would quickly result in these warships becoming functionally useless. The fact that the Gripen aircraft are in storage further substantiates my contention that they and other arms deal acquisitions were not bought for any rational defence needs but, instead, for the bribes that would flow from the offsets.

61. In particular, the affordability study recommended that the Gripens should be cancelled, or at least deferred. However, this recommendation was overruled by the Cabinet sub-committee because of the expected offset “benefits.”

62.As noted in paragraph 5 above, the 1996 Defence White Paper acknowledged that there was no conceivable foreign military threat to South Africa and that poverty alleviation was the country’s priority. This was also confirmed in the subsequent 1998 Defence Review.

63.Accordingly, to bypass Parliament plus the reality that there was no funding for the arms deal acquisitions the ploy of offset benefits was created.

64.A Department of Finance memorandum dated 30 June 1998 entitled “Availability of Funding For Procurement of Defence Equipment” was jointly signed by Trevor Manuel as Minister of Finance with Ms Maria Ramos as Director General: Finance. The document states:

“The Department of Finance has performed a fiscal analysis to estimate the level of funds that will be available over the next 20 years for spending on the proposed government-to-government contracts.

The Department of Finance strongly recommends that the total sum of any contracts signed should not exceed the amount that has been estimated as affordable, as indicated in Table 1.”

65. Table 1 projects affordable defence procurements in the year 2001/2002 as R1.4 billion, rising to R4.5 billion by the year 2018/2019. The document also projects as “affordable,” overall defence spending as rising from R9.9 billion in 1998/1999 to R21.7 billion in 2013/2014, and R27.9 billion by 2018/2019.

66.Given that the defence budget in 2016/2017 is R47 billion, it is already double what Treasury in 1998 deemed would be “affordable” given South Africa’s other socio-economic priorities. Yet the Gripens and other equipment are in storage because of a lack of funding simply because the arms deal “blew the budget” on equipment bought primarily for bribes rather than any rational defence requirements.

67.Despite this Treasury memorandum and financial stringencies, the Cabinet in November 1998, less than five months later, approved the acquisition of warships and warplanes at a cost of R29.8 billion. The acquisitions, it was announced, would generate R110.8 billion in offsets benefits and create 64 165 jobs.

68.Archbishop Ndungane and I had met the Minister of Defence, Mr Joe Modise some months earlier. Archbishop Ndungane again emphasised that poverty eradication was South Africa’s overriding priority. In addition to South Africa’s socio-economic needs, we discussed countertrade/offsets and informed the Minister of their notoriety amongst international bankers for fraud and as cover for payment of bribes.

69.We reminded the Minister of the aborted Spanish corvette proposals of 1994/1995 in which purchase of three corvettes for R1.7 billion would supposedly generate R4.8 billion in offsets (then referred to as countertrade). Analysis had established that instead of being economically beneficial, the purported countertrade “benefits” would actually destroy the existing South African fishing industry.

71.The Spanish corvette proposals were cancelled after widespread public opposition. Minister Modise conceded the validity of the fishing industry analysis, but ominously remarked that he “would know to do it differently next time.”

72.Given that there were no conceivable foreign military threats to justify the arms deal expenditures, a ploy was devised by the Minister of Defence in conjunction with the Minister of Trade and Industry to deceive parliamentarians and the public that arms acquisitions would stimulate economic development via offset obligations.

73.The National Participation Programme was adopted in 1997, in

terms of which all government foreign procurements over US$10

million became subject to offset obligations. These issues are

traversed from page 483 of the Commission’s report, including

how credits would be allocated in respect of three objectives,

namely local sales, exports and investments.

74.Notwithstanding South Africa’s financial circumstances set out in the Treasury memorandum, but as recorded by Hansard in his last budgetary speech to Parliament in March 1999, Minister Modise made the following statement regarding the arms deal and its offset programme:

“I am heartened by the commitment shown to the acquisition project by both the president and the finance minister in their keynote addresses of this parliamentary session. Re-equipping the defence force is being done in a way as to add value to our economy. In return for our expenditure, our economy will benefit by an estimated R110 billion of new investment and industrial participation programmes; and the creation of approximately 65 000 jobs.

The sceptics have suggested this is wishful thinking. The following breakdown has been very carefully calculated with the department of trade and industry. Of the R110 billion, over R26 billion is made up of direct investment into the project; R25 billion is estimated revenue from local sales stemming from business projects that will be established, and R59 billion will be derived from export sales.

As to concerns that such transactions are open to improper influences, I want to assure you that the bids have gone

through a fine-tooth comb to ensure an ethical outcome. It is clear that this acquisition project will enormously benefit

South African industry as a whole. It will benefit the defence industry in particular, which receives a new lease of life.”

75.Offset obligations were required in the ratio of 86 percent as

National Industrial Participations (NIPs) administered by the

Department of Trade and Industry (DTI) and 14 percent as

Defence Industrial Participations (DIPs) administered by Armscor

on behalf of the Department of Defence.

76.When Parliamentarians and also the Auditor General sought details of the offset contracts, their inquiries were blocked by DTI officials with excuses that the offset contracts were “commercially confidential.”

77.When Advocate Tayob Aboobaker SC, the chief evidence leader,

reopened the Commission’s hearings on 20 January 2014, he

quoted from Mr Modise’s speech, and declared:

“On the basis of Mr Modise’s address to Parliament, the

expectation raised was that the economy would benefit by

R110 billion of new investment and industrial participation

programmes and that 65 000 jobs would be created. What

was actually delivered by the SDPP in terms of said offsets

and jobs has therefore to be tested against this benchmark.”

78.However, in deviation from and in contradiction of the first of its

terms of reference, namely the “rationale,” the Commission made

no attempt to test this benchmark as the actual “rationale” for the

acquisitions.

79.The fallacy and “red herring” of re-equipping the SANDF to meet

its constitutional obligations was invented to divert attention from

those realities. Predictably, the offset “benefits” of R110 billion

that were the actual rationale for the arms deal did not materialise:

nor did the jobs.

80.Advocate Aboobaker resigned shortly thereafter. Although he was the Commission’s chief evidence leader, he was not replaced. Judge Francis Legodi, Advocate Barry Skinner SC, Advocate Carol Sibiya and Ms Kate Painting also resigned, and also were not replaced.

81.Their resignations gave added credence to Mr Moabi’s allegation

that “Judge Seriti was pursuing a second agenda to silence the

Terry Crawford-Brownes of this world.” Advocates Skinner and

Sibiyas’ resignation letter also confirmed the suppression of

evidence.

82.As traversed in previous paragraphs, the Commission suppressed the IONT and Financial Working Group papers plus the huge volume of evidence against BAE, GSC and GFC left lying in two shipping containers.

83.In addition, the Chairperson in October 2014 disallowed admission of the Debevoise & Plimpton report into Ferrostaal when I endeavoured to introduce it as evidence to corroborate the notoriety of offsets for corruption.

84.Ferrostaal and Thyssens (now ThyssenKrupp following the merger of Thyssens and Krupp in 1999) were centrally involved in the Helmut Kohl scandal regarding donations to the German Christian Democratic Party from arms and steel companies. ThyssenKrupp is the dominant member of both the GSC and GFC whilst Ferrostaal’s involvements in the arms deal included responsibility for managing the GSC’s offset commitments. Ferrostal also merged with MAN, which became MAN Ferrostaal.

85.I visited Germany in March 2011 in connection with the Control Risks investigation into the MAN Ferrostaal scandal. I met the official in the Federal Department of Justice in Berlin responsible for oversight of Germany’s commitments to the OECD Anti-Bribery Convention. I also met the prosecutors in Munich involved in the MAN Ferrostaal matter. All expressed regret at the lack of cooperation from South African officials.

86.The Debevoise & Plimpton report was commissioned by new management at MAN Ferrostaal following a major corruption scandal in Germany. The report was apparently deliberately leaked by that new management, and then acknowledged as authentic. It has been widely disseminated internationally.

87.The report was issued in April 2011, ie three and a half years before the Chairperson disallowed its admission in the Commission. It comprises 189 pages and covers 14 countries. Of these, 13 pages pertain to South Africa.

88.The old management at Ferrostaal apparently employed a whole department that specialised in how to pay bribes in “third world” countries, and for a five percent fee then contracted out that “expertise” to other German companies.

89.Ferrostaal in 2012 paid a plea bargain fine of Euros 140 million because of payment of bribes relating to the sale of submarines to Greece similar to the submarines sold to South Africa.

90.The report finds that South Africa was just one of the countries in which Ferrostaal habitually employed dubious practices, and where very little or no care was taken to monitor the activities of consultants, notably including Mr Tony Georgiadis.

91.The pages pertaining to South Africa reveal that offsets were merely a vehicle for Nützliche Aufwendungen (meaning “useful business expenses”), which is a German euphemism for bribes.

92.Three of the Commission’s six terms of reference deal with the purported offset “benefits” that, per paragraph 74 above, Minister Modise insisted would flow from the arms deal acquisitions.

93.As Advocate Aboobaker noted, per paragraph 77:

“What was actually delivered by the SDPP in terms of said offsets and jobs has therefore to be tested against this benchmark.”

94.The Debevoise & Plimpton report confirms that Ferrostaal and GSC had no intention of complying with their offset obligations in South Africa.

95.Although the GSC was obligated to deliver offsets to the value of Euros 2.85 billion, the report finds that in actuality it spent only Euros 62 million, or 2.2 percent of its offset obligation.

96.The Debevoise & Plimpton report further reveals that even the Euros 62 million supposedly spent as offsets were, in fact, mainly “non-refundable loans.”

97.The report also notes that functionally there is no difference between a “non-refundable loan” and a straightforward grant. One might add there is also no functional difference between a “non-refundable loan” and a bribe.

98.Nonetheless, DTI repeatedly informed Parliament that the GSC had met its offset obligations. Its report for the financial year April 2010 to March 2011 declared all GSC milestones and obligations had been met in full – and had even been exceeded.

99.That report claims that against an offset obligation of Euros 2.85 billion that GSC’s offset performance per March 2011 had been Euros 3,117,761,024, and had created or retained 8 800 jobs.

100.The DTI report completely contradicted the Debevoise & Plimpton report. Faced however, with wide international dissemination of the Debevoise & Plimpton report, the Minister of Trade and Industry in March and April 2012 confirmed the veracity of its revelations.

101.The Minister of Trade and Industry and his officials informed Parliament’s Portfolio Committee on Trade and Industry that actual NIPs offset investments by BAE, GSC and GFC were:

Company

NIP Obligation Actual

%

BAE/Saab

US$7.2 billionUS$203 million2.8

GSC

Eur2.85 billionEur63 million2.2

GFC

Eur2.0 billionEur44.4 million2.2

(Democratic Alliance Media Statements: “DTI Briefing Reveals Shocking New Information on Arms Deal Offsets” 16 March 2012 and “Arms Deal Offsets: A Giant Rip-Off” 17 April 2012).

102.In so doing, the Minister also repudiated previous claims by his department that the German Frigate Consortium and BAE had likewise met their NIP offset obligations.

103.I submit to this honourable court that non-delivery by the arms

companies of the offset “benefits” and NIP obligations constitutes

massive fraud against the people of South Africa.

104.A subsequent DTI audit report acknowledged that DTI lacked the

capacity to manage or audit the NIP programme. The Minister’s

explanation for the inflated reports to Parliament was that highly

exaggerated and unauthorised “multiplier effects” had been

applied by DTI officials to disguise the realities. This had resulted

the claim, inter alia, that the GSC had not only met but had

dramatically exceeded its offset obligations.

105.Given the admission by the Minister of Trade and Industry back in

2012 of this fraud, it beggars belief that the Commission in its

report to the President released to the public on 21 April 2016 not

only misrepresented the actual rationale for the arms deal, but

found:

“23.3On whether the job opportunities anticipated to flow from

the Package have materialised, the Commission indicated

that the projected number of jobs to be created through the

arms procurement process was achieved. The Commission

states that the probabilities are that the number of jobs

created or retained would be higher than 11 916.

23.4On whether the offsets anticipated to flow from the arms

procurement have materialised, the Commission found that

it was fair to conclude that the anticipated offsets have

substantially materialised. Adequate arrangements are in

place to ensure that those who have not met their obligations

do so in the immediate future.”

106.Accordingly, I submit to this honourable court that the report of

the Arms Procurement Commission is totally discredited, and I

therefore call for it to be set aside.

c) 1. Failure To Comply With Section 217 (1)

of the Constitution:

107.In addition to establishing the Constitution as the supreme law of the Republic, section 2 declares “that law or conduct inconsistent with it is invalid, and the obligations imposed by it must be fulfilled.”

108.My written submission to the Arms Procurement Commission

made in June 2012 and verbal testimony in October 2014 were

both founded upon the premise that the arms deal offsets were

unconstitutional in terms of section 217 (1) and, accordingly, that it

was the obligation of the Commission to recommend to President

Zuma that the contracts should be declared null and void.

109.My written submission was made after the acknowledgement in

Parliament by the Minister of Trade and Industry that the offset

programme was fraudulent, yet was ignored.

110.My submission in June 2012 was supported by a legal opinion by

Advocate Geoff Budlender SC, which is appended marked TCB1.

111.In his legal opinion on section 217 (1) written in May 2012,

Advocate Budlender focussed upon the requirement of a system

by which offsets could conceivably might qualify as meeting the

constitutional obligations of “fair, open, transparent,

competitive and cost-effective.”

112.Advocate Budlender’s opinion declares:

“6.1A system of procurement which is ‘fair, equitable,

transparent, competitive and cost-effective’ has to be put in

place by means of legislation or other regulation,

6.2 Once such a system is in place and the system

complies with the constitutional demands of section 217 (1),

the question whether any procurement is legally valid must

be answered with reference to that legislation or

regulation,

9.0I assume that at the time the SANDF, like other

organs of state, had a ‘system’ for procurement, and

procured the arms in terms of that system. I assume that the

system permitted the use of offsets in procurement. The

question therefore is whether the system had the qualities

which are required by section 217 (1) of the Constitution.”

113.Advocate Budlender continued:

“27.2 In the system which was used in the contracts,

offsets played a very material role. There is reason to

doubt whether such a system is in accordance with

these requirements,

27.3If the contracts were not in accordance with those

requirements, they were unlawful and invalid.

Whether such a contract will be set aside by a court

depends on the facts of the case.

27.4If the contracts are marked by bribery or other

improper conduct, a participant in the corrupt

arrangement cannot receive or retain any of the

amounts payable under the contract.”

114.Advocate Budlender’s assumption of a “system” for procurements

proved only partially correct. True, the Department of Defence had

devised a comprehensive evaluation system based on military and

related criteria, including costs for each of the arms deal tenders.

These criteria were recorded in detail in the report of the 2001

Joint Investigation Team (JIT).

115.The JIT report also records however, that this evaluation system

was overridden by factors, especially including purported offset

“benefits,” until a pre-determined selection was reached to award

the warship contracts to Germany and the warplane contracts to

Britain and Sweden.

116.During their private holiday in South Africa in March 1996, a former German Ambassador to South Africa, Dr Immo Stabreit and his colleague were my houseguests for ten days at my home in Cape Town. They informed me then that the German government was “determined at all costs” to win the warship contracts. After completing his assignment in South Africa in 1992, Ambassador Stabreit was appointed German Ambassador to the United States and subsequently to France. Their information alerted me to the Helmut Kohl scandal then erupting in Germany. It emerged that Chancellor Kohl had accepted political party donations from Thyssens for promoting German arms exports to Saudi Arabia and other “third world” countries. The Helmut Kohl scandal became the vehicle by which Ms Angela Merkel gained influence within the Christian Democratic Party, becoming Chancellor of Germany in 2005. Chancellor Kohl in due course negotiated a substantial plea bargain fine but refused to disclose details, and the scandal periodically continues to resurface in Germany.

117.The information also corroborated media reports in 1995 that Deputy President Mbeki in conjunction with the German Foreign Minister, Klaus Kinkel together with executives of Thyssens had negotiated proposed exports of South African steel to Germany as countertrade (offsets) to pay for German-built corvettes (Weekend Argus 20/21 May 1995 “Corvettes – Thabo All At Sea” and Cape Times 19 May 1995 “The Battle Of The Corvettes.”).

118.As confirmed by the JIT report, proposed offset benefits and

other manipulations overrode the evaluation system and

criteria. As examples:

118.1 The GSC tender for submarines came last in terms of

military criteria, but was awarded the contract on the

basis of wildly inflated offset proposals for construction

of a stainless steel plant at Coega.

118.2 The GFC tender for frigates (corvettes) failed the engine

specifications, but GFC’s bid was reinstated following

interventions at higher level.

118.3 The South African Air Force in July 1997 informed the

government that BAE’s proposals were both unsuited to

South Africa’s requirements and too expensive. BAE then

failed the evaluation criteria.

118.4 The criteria were then manipulated to exclude cost from

consideration in what Minister Joe Modise described as “a

visionary approach.”

118.5 Given that there was no budgetary provision for this type of

“visionary approach” acquisition, the Secretary for Defence,

Pierre Steyn resigned in 1998 rather than take accounting

responsibility for such infringements of the tender

processes.

118.6 Per paragraph 161below from the affidavit by Mr Johan du Plooy (formerly of the Scorpions), “when the Minister was warned that he was pursuing a programme which appeared to be patently unfunded, the Minister said ‘…they must not be in a hurry to let Parliament know that they are pursuing something that is not funded…’”

118.7 In addition, the JIT records that BAE had virtually no offset

proposals after its initial offset proposals were rejected.

118.8 In his testimony before the Commission, the former

Secretary for Defence confirmed:

a)A parallel procurement system was established, which

was outside the tried-and-trusted system, and overrode

the tried-and-trusted system,

b)There was a reckless disregard of fiscal discipline, and

c)An unjustifiable decision was made to purchase

British aircraft at a considerable extra cost, which was

unnecessary.

119.Accordingly, whilst a “tried-and-trusted system” had been established by the Department of Defence and SANDF in terms of military criteria evaluations, it was overridden by a parallel procurement system of offset obligations devised by DTI and Minister Modise.

120.In addition, DTI finally acknowledged in 2014 that it lacked

capacity to administer accompanying NIP offset obligations.

Wildly inflated “multiplier effects” were devised in efforts to

disguise that reality.

121.The belated admission by DTI confirms that in practice, that

there was no such “system” as required by section 217 (1).

122.In respect of the requirements of section 217 (1), I specifically

plead that the arms procurements were not fairly or rationally

concluded by reason of the following facts and circumstances:

122.1The socio-economic needs of the poor of South Africa

both in 1999 and now strongly militate against incurring

“unaffordable” expenditures on arms inappropriate for South

Africa’s defence needs.

122.2The Defence White Paper of 1996 correctly noted that there

are no conceivable foreign military threats to South Africa

and that, given heavy militarisation during the apartheid era,

priority needed to be given to poverty alleviation in the post-

apartheid democracy.

122.3Expenditure on arms procurements was prioritised over

HIV/Aids at a time when the government declared it could

not afford to provide treatment for HIV/Aids. That policy

continued until overturned by a judgement of this court.

122.4 The financial risks involved incurring foreign currency

liabilities by foreign borrowings for up to 20 years to

purchase unnecessary arms has severely compromised South

Africa’s national security, fiscal health, economic

prosperity and its transition to a constitutional democracy in

which human rights are respected, protected, promoted and

fulfilled.

122.5 The arms deal affordability study provided to Cabinet

ministers in August 1999 strongly suggested inter alia that

purchase of the BAE/Saab Gripens should be cancelled or at

least deferred.

123.I specifically plead that the BAE Hawk and the BAE/Saab Gripen

aircraft and the GSC submarines were not equitably or rationally

acquired by reason of the following facts and circumstances:

123.1As recorded in the JIT report, the South African Air Force as

early as July 1997 informed the government that the BAE

proposals were both too expensive and unsuited to South

Africa’s requirements.

123.2Tender procedures were manipulated to favour the success

of the BAE tender.

123.3 The tender process was tainted by adoption of what the

then Minister of Defence, the late Mr Modise, described as a

“visionary approach” in terms of which the cost of the

aircraft was excluded as a factor for consideration in the

tender and award process.

123.4Of four bidders for the submarines, the GSC tender came

last in terms of military criteria.

123.5To swing the acquisition to GSC, grossly inflated offset

benefits were introduced for construction of a stainless steel

plant at Coega outside Port Elizabeth.

123.6Against a notional rand cost of R5.2 billion for three

submarines, the offset “benefits” were supposed to amount

to R30.4 billion, and were to create 16 251 jobs. This

amounted to one quarter of all the promised 65 000 jobs

that ostensibly would result from the arms deal.

123.7Predictably and as recorded in the Debevoise & Plimpton

report, those offset “benefits” never materialised, and

were simply vehicles to pay bribes in the form of “non-

refundable loans.”

123.8Within months, the Coega stainless steel plant was cancelled

as economically unviable. It was followed by a condom

factory. In turn, this was followed by the takeover of the

bankrupt apartheid-era Magwa tea estate in Transkei. These

and other offset projects all failed.

124.I specifically plead the acquisitions were not acquired in a manner

that was not transparent or rational by reason of the following facts

and circumstances:

124.1 Lower tenders were rejected to favour the tenders by BAE,

which was given undue preference over Aermacchi.

124.2 The Auditor General and members of Parliament were

denied vital information regarding the offsets because of a

spurious excuse imposed by the British government’s

Defence Industry Services Organisation (DISO), but

enforced by DTI, that the offset contracts were

“commercially confidential.”

124.3 Sound advice and recommendations from the South

African Air Force regarding its actual requirements were

ignored.

124.4The financial risks of the largest procurement in South

African history were ignored.

124.5The financial working group’s affordability study proposed

that purchase of the BAE/Saab Gripens should be cancelled

or at least deferred.

124.6 Instead, a convoluted “option to cancel” (in contrast to an

option to purchase) provision was incorporated. The costs of

cancellation were so “front-loaded” that this option was not

only convoluted but prohibitively expensive.

124.7 The reason revealed in the affordability study for not

cancelling the Gripen acquisitions was “the procurement of

the Gripen from BAE/SAAB was perceived as generating

substantial benefits through the strength of their industrial

participation offers and the role of BAE/SAAB in Denel.”

124.8 As confirmed by the Minister of Trade and Industry in

Parliament in 2012, BAE’s NIP offset obligations of

US$7.2 billion failed to materialise.

125.I specifically plead the acquisitions were not acquired in a manner

that was not competitive or rational by reason of the following

facts and circumstances:

125.1 Lower and more suitable tenders were ignored,

125.2 The South African Air Force recommended acquisition of

Aermacchi aircraft in preference to the BAE Hawk,

125.3 The Aermacchi price was lower than BAE’s,

125.4 The Aermacchi tender was nonetheless rejected.

126. I specifically plead the acquisitions were acquired in a manner

that was not cost-effective or rational by reason of the following

facts and circumstances:

126.1 The “visionary approach” of the then Minister of Defence

that excluded cost thereby contradicted an express and

mandatory requirement of section 217 (1) of the

Constitution,

126.2 The current Minister of Defence told Parliament in March

2013 that 12 of the 26 BAE/Saab Gripen fighter aircraft are

“in long-term storage” because the Air Force does not have

funding to fly them. (“A Dozen SAAF Gripens In Long

Term Storage,” Defenceweb, 13 March 2013).

126.3 It has subsequently been reported that there are only seven

qualified pilots for the 24 BAE/Hawk aircraft and only five

qualified to fly the 26 BAE/Saab Gripens. (“Possible

Permanent Grounding For Either Gripen Or Hawk Coming,”

Defenceweb, 29 March 2016).

126.4Notwithstanding these realities and in contradiction even of

the Minister of Defence’s statement in Parliament, the

Commission irrationally found per paragraph 23.2 above,

that “all the arms and equipment are well-utilised.”

127.In such circumstances and in accordance with the provisions

of section 2 of the Constitution, the arms deal procurement

agreementswere all invalid because of conduct by the parties

to the agreements that was not consistent with the Constitution.

c) 2. Failure To Comply With Section 195 (1) of the Constitution:

128.The pivotal importance of section 217 (1) is confirmed by the

Treasury and other regulations which require “fair, equitable,

transparent, competitive and cost-effective” public administration.

These values are further established in section 195 (1) in its sub-

paragraphs (a), (b), (c), (d), (e), (f) and (g).

129.Continuing attempts to cover-up the arms deal scandal violate

theseconstitutional commitments. Well illustrating the failure to

comply with issues of ethics (a), public participation in policy-

making (e), accountability (f) and transparency (g) is the argument

presented by the former Minister of Finance and former Director

General: Treasury in the Cape High Court in 2003, per paragraph

16 that:

“The loan agreements set out the terms and conditions

upon which the Republic of South Africa, acting through

its Department of Finance (as it was known) was able to

raise monies by way of advances. … Exposure of the

content of these arrangements would, in the considered view

of the Second Respondent and National Treasury, be

contrary to the public interest. The transactions in question

are part of the financial business carried on by the

Government and the terms and conditions upon which it

does so ought not to fall within the public domain.”

130.I filed case 9987/2001 in the Cape High Court in November 2001,

seeking to set aside the foreign loan agreements that give effect

to the arms deal acquisitions.

131.In her responding affidavit in March 2002 on behalf of the

Minister, the then Director General: Treasury affirmed:

“The agreements he signed are self-standing loan

agreements with binding force and not dependent on any

other agreement entered into by government.”

132.Her statement contradicted public statements by the Government Communication and Information System (GCIS) that the arms deal supply agreements signed on 3 December 1999 by the Minister of Defence were still subject to finalisation of loan agreements by the Minister of Finance. It also made no banking sense because the Minister would not enter into such loan agreements without a specific purpose. Or, alternatively, make purchases without knowing how he was going to pay for them.

133.The inter-dependency of the loan agreements with the supply and

offset agreements becomes apparent with the appendices marked

TCB 2 and TCB 3

134.Legal advice followed that no court would believe me were I to allege that the Minister of Finance was lying. I therefore would have to file for discovery of documents, hence case 5129/02 filed in July 2002 in the Cape High Court, in which judgement was given in March 2003. These issues were traversed in paragraphs 24-31 above.

135.In June 2002 I received from a source in London the 255 pages

of the loan agreements and ancillary documents for the BAE/Hawk

and BAE/Saab Gripen fighter aircraft.

136.The core agreement signed on page 47 by Trevor Manuel “for and

on behalf of the Republic of South Africa acting through its

Department of Finance” is appended, marked TCB 2.

137.The purpose of the agreement is plainly stated on page 12 as

finance in five tranches for the purchase of up to 12 Hawk aircraft

and up to 28 Gripen aircraft, thereby disproving the Director

General’s averment that:

“The agreements he signed are self-standing loan

agreements with binding force and not dependent on any

other agreement entered into by government.”

138.Perchance, about two weeks later but still in June 2002, I met the

Minister in a coffee shop at the Sandton Sun Hotel. The Minister

opened the conversation, saying “we should be talking rather than

fighting in the media.”

139.I replied: “Yes, Trevor, let’s talk. But I’ve got the loan agreements for the arms deal. I warned you not to sign them. Let’s talk.”

140.When the Minister realised that I was not bluffing, he exploded and shouted “I will sue the pants, I will sue the (expletive) pants off you. And there are witnesses here to that.” The witnesses were Ms Maria Ramos and Mr Lesetja Kyanyago.

141I filed all 255 pages of the agreements with my application case

5129/02 for discovery of documents. The documents were

verified in court as authentic by the Minister’s legal counsel, and

were referred to during court proceedings as “the black file.”

142.The Minister’s legal counsel then referred Judges Andre Blignaut

and Denis Davis to the representation, covenant and default

clauses (21-23) on pages 30-35 of the Barclays Bank loan

agreement. He then described the default clauses as “potentially

catastrophic for South Africa.”

143.Herein lies a further explanation why the former Minister, National

Treasury and the Arms Procurement Commission have gone to

such extreme and protracted lengths to deny me discovery of the

IONT and Financial Working Group documents.

144.The Barclays Bank loan agreement can be described as a textbook

example of “third world debt entrapment” by European banks and

governments. Herein lies the acute sensitivity of the default

clauses, and why the former Minister requested the court to

suppress “the black file.” However, no such order was given by

the court.

145.Instead, as traversed above, the court awarded me discovery within

ten days of the IONT and Financial Working Group papers.

Section 195 (1) (b) specifically requires that “efficient, economic

and effective use of resources must be promoted.”

146. As also traversed above, most of the BAE Hawk and BAE/Saab Gripen fighter aircraft that are being financed by the Barclays Bank loan are in “long-term storage,” and South Africa does not have qualified pilots to fly them.

147.These issues were the subject of the Auditor General’s report to Parliament in September 2000 entitled “Special Review Of The Selection Process of Strategic Defence Packages At The Department of Defence.”

148.In essence, the Auditor General reported to Parliament that BAE had been unduly favoured; that offsets could not be guaranteed; and that no consideration had been given to the personnel requirements for the acquisitions.

149.After public hearings in October 2000, the Auditor General’s

report, in turn, became the subject of the Standing Committee on

Public Accounts 14th report. This was unanimously adopted by the

National Assembly, and called for a multi-party investigation into

the arms deal.

150.The history of the resulting cover-up has been extensively

documented in several books, the two most definitive being The

Devil In The Detail by Paul Holden and Hennie van Vuuren and

After The Party by Andrew Feinstein.

151.As stated above, the supply agreements were signed on 3 December 1999, subject to finalisation by the Minister of Finance who duly signed the loan agreements on 25 January 2000.

152.Another agreement was concluded on 3 December 1999 between Armscor, the Department of Defence, the Department of Trade and Industry and BAE Aerospace (Operations) Ltd. It was signed by M.G.P. Lekota as Minister of Defence, an official of DTI and others. The agreement is appended, marked TCB 3.

153.The agreement sets out in detail BAE’s DIP and NIP offset

obligations in return for purchase of the BAE Hawk and BAE/Saab

Gripen fighter aircraft.

154.Per the agreement’s paragraph 4.2, the DIP obligations were set at US$680 431 667 in respect of the BAE Hawks and US$808 049 501 in respect of the BAE/Saab Gripens, ie a total total of US$1 488 481 168 (or just under US$1.5 billion).

155.Per the agreement’s paragraph 4.3 the combined NIP obligations were set at US$7.2 billion. Thus, the total BAE and Saab DIP and NIP obligations amounted to US$8.7 billion (or approximately R130 billion in current rand values).

156.Paragraph 20 of the agreement sets out the remedies in case of bribes that “Armscor and the South African government acting together may summarily cancel the agreement and claim damages resulting from the cancellation or claim an amount equal to 5% of the Total Contract Price as agreed pre-estimated liquidated damages.”

157.My application under case CCT103/2010 included 160 pages of affidavits by Mr Johan du Plooy of the Scorpions and Mr Gary Murphy of the British Serious Fraud Office (SFO).

158.Their affidavits detail why and how BAE had made payments of

£115 million to secure its contracts with South Africa, to whom the

payments were made and which bank accounts in South Africa

and elsewhere were credited.

159.The documents formed part of the ex parte application in the High

Court of South Africa, Transvaal Provincial Division in Pretoria in

November 2008 by the National Director of Public Prosecutions,

and preceded the raids on BAE’s premises in Pretoria and the

Western Cape.

160.I request this honourable court to take judicial notice of the

affidavits by Messrs du Plooy and Murphy.

161.In his affidavit, Mr du Plooy records:

“46.Following on cabinet approval of the preferred

suppliers, an International Offers Negotiating Team

(“IONT”) was formed, comprising inter alia members from

DoD, Armscor, Treasury and DTI. While the IONT were

negotiating the umbrella contracts and financing

arrangements at a high level, the respective programme

teams were negotiating technical details with the respective

suppliers in order to finalize the configuration of each of the

equipment types while remaining within a predetermined

cost ceiling.

48. Gen Steyn (who was, as mentioned above, the Secretary

of Defence during the Arms Acquisition Deal) not only

corroborates Griesel’s evidence where it is applicable to

him, but is furthermore explicitly critical of the blatant way

in which the various stages of acquisition were rushed

through and adds the following:

48.1He noted that the acquisition process was commenced

at a time when budgetary allocations to the DoD were

experiencing a downward trend. There was in other

words no apparent support by the Director-General of

Finance for this sort of venture.

48.2When he raised these concerns, he was told that they

had adopted a new approach which called for the off-

setting of obligations, of which he was also sceptical.

48.5Minister Modise knew at that stage that there was

no budgetary provision for this type of acquisition.

When the Minister was warned that they were

pursuing a programme which appeared to be patently

unfunded, the Minister said ‘…they must not be in a

hurry to let Parliament know that they are

pursuing something that is not funded…’

48.6He also testifies that it was on Minister Modise’s

instructions that a non-costed option (illegible line) 21

August 1998, 31 August 1998 and 18 November 1998

as indicated above.

49.Esterhuyse, already referred to above, corroborates in

broad terms what Grisel says, but adds the following:

49.3At approximate the beginning of 1997, Minister

Modise convened an informal meeting between

Armscor (with inter alia Esterhuyse and Mr Ron

Haywood – then Chairperson of Armscor) and DISO

(the marketing arm of the British Government and

their defence industry of military equipment). At this

meeting DISO presented a scheme for re-equipping

the South African Defence Force under a certain

MOU with the South African Government, in

exchange (based on a complex financial model) for

South Africa’s gold reserves.

49.5The first formal meeting with DISO was held on 14

February 1997.

49.6During this first meeting Esterhuyse emphasised the

principle of tendering and competitive bids, which

was not what the British expected. His impression

was that they were under the understanding that they

could structure a deal where they could be exclusive

suppliers. Concerns were already raised at that stage

about the lobbying of ministers and parliamentarians

by DISO and certain British companies, such as BAE.

49.7The second meeting with DISO took place on 26

March 1997. At that stage the financial consultants to

Armscor had already advised that the model suggested

by the British had no merit.

49.9He [Esterhuyse] sensed at the time that they were

being pushed into an arms procurement programme

for which the Department was not fully prepared at

that stage.

63.It seems to have been the assumption of the JIT that since

the ultimate decision on the preferred bidder was taken at

Ministerial level, this effectively excluded the possibility

that the change in the value system and hence the successful

bidder was achieved corruptly. As appears below,

subsequent information received from the SFO tends to cast

doubt on this assumption. In particular, the covert payment

by BAE of huge amounts of commissions to local agents,

including one Fana Hlongwane (the erstwhile special

advisor to the then Minister of Defence Modise), which

appear to be completely disproportionate for any work

performed, calls for further investigation.

66.In summary, it is clear that:

66.1The value system that was developed with the purpose

of allowing the objective comparison of the

competing bidders in the Arms Acquisition Deal was

deviated from in a material way in respect of the LIFT

programme. Despite the obvious budgetary restraints

which applied to South Africa as an emerging

economy, cost was removed as a factor in

determining the best tender for the lead in fighter

trainer. The result of this change was that the Hawk

bid was placed in a far more favourable position vis-a-

vis the Aermacchi bid.

66.2The BAE NIP offer appears to have been substantially

over-valued, to the further detriment of the Aermacchi

bid. The cumulative effect of the above two factors

resulted in the BAE leapfrogging Aermacchi as the

preferred bidder.

88.The SFO has provided sufficient information from which it

is reasonable to suspect … that BAE has committed at least

the crimes of corruption and money laundering in relation to

the arms acquisition deal through its system of agents who

overtly and covertly received extraordinary sums of money

for little apparent legitimate reason.”

162.The affidavits by Messrs du Plooy and Murphy in respect of BAE corroborate the conclusions of the Debevoise & Plimpton report in respect of the German Submarine Consortium that offsets were simply vehicles to pay bribes, and that local consultants were paid huge sums of money for which there was little or no evident legitimate reason.

163.The affidavits also corroborate my contentions that Minister Modise’s insistence that R30 billion spent on armaments would generate R110 billion in offsets was the actual “rationale” for the arms deal. The Arms Procurement Commission then colluded with the executive in attempting to conceal that by parading admirals and generals who testified about the necessities of purchasing warships and warplanes.

164.Given that Parliament was being deliberately deceived by the Minister’s pursuit of his “visionary approach” with “something that is not funded,” the Commission’s focus on a purported need to re-equip the SANDF was both fallacious and a “red herring.”

165.As part of the continuing cover-up of the arms deal scandal, the intention was to divert attention from corruption and money laundering, of which the malpractice of offsets is internationally notorious.

166.As traversed above, Parliamentarians and the Auditor General were systematically denied information by DTI about the offsets on the spurious excuses that the contracts were “commercially confidential.”

167.Such excuses contradicted the role of Parliament in terms of section 42 (1) to “scrutinise and oversee executive action,” as well as the function of the Auditor General in terms of section 188 (1) (a) (c) “to audit and report on the accounts, financial statements and financial management” of all national administrations and institutions.

168.The explanation for DTI’s refusal to provide either Parliamentarians or the Auditor General with details of the offset contracts is found in paragraph 19 of the agreement marked TCB3 above signed by the Minister of Defence, the acting Director General of DTI and Ron Haywood as chairman of Armscor.

169.Paragraph 19 of that agreement concerning Confidentiality And Publicity of the offsets, stipulates:

“Subject to the provisions in relation to Confidentiality and/or

Secrecy in the Supply Terms, NIP Terms and DIP Terms, any

information obtained by any Party to this Agreement in terms, or

arising from the implementation, of this agreement shall be treated

as confidential by the Parties and shall not be divulged or

permitted to be divulged to any person not being a Party to this

agreement, without the prior written consent of the other Parties

save that—

19.5The South African Government shall not be precluded from

disclosing any information it deems to be in the public

interest, save that it shall not be entitled to disclose

proprietary information or information of a commercial

nature and which is confidential, without the written

agreement of the Seller.”

170.Such “commercial confidentiality” clauses are routinely inserted into British arms export contracts at the insistence of the British government and the former DISO, now restructured as UK Trade and Investment Defence and Security Organisation (UKTIDSO).

171.The deliberate intention is to prevent scrutiny by Parliamentarians or officials such as the Auditor General or by the general public of offsets as a fraudulent scam intended to promote proliferation of weaponry in so-called “third world” countries.

172.I submit to this honourable court that in so doing, the British government and BAE have usurped the functions of both the South African Parliament and the Auditor General to exercise oversight over the Executive branch of government.

173.Herein lie the explanations, I submit:

173.1Why the former Minister of Defence with collusion of the inter-

ministerial committee promoted the economically irrational

proposition that R30 billion spent on armaments would generate

R110 billion in offsets and create 65 000 jobs,

173.2Why the former Secretary For Defence testified:

a)A parallel procurement system was established, which

was outside the tried-and-trusted system, and overrode

the tried-and-trusted system,

b)There was a reckless disregard of fiscal discipline, and

c)An unjustifiable decision was made to purchase

British aircraft at a considerable extra cost, which was

unnecessary,

173.3Why the former Minister of Finance and Director General: Treasury back in 2003 and followed by National Treasury and the Arms Procurement Commission went to such extraordinary lengths to deny me discovery of the IONT and Financial Working Group papers that would expose the corruption and malpractices inherent in the arms deal.

174.The international notoriety of offsets for corruption is illustrated by confirmation in Parliament in March and April 2012 by the Minister of Trade and Industry of actual delivery of NIP offset obligations by BAE, GSC and GFC. Actual delivery of “benefits” varied from 2.2% to 2.8%, and that these can be accounted for as “non-refundable loans” and other forms of bribes.

175.Further illustrating the point, Archbishop Desmond Tutu in June 1998 sent me to Stockholm, Sweden to speak at a conference organised by the Kristna Fredsrörelsen (Christian Peace Movement) about the issue of Swedish arms exports to so-called “third world” countries.

176.The essence of my 15 minute speech was to thank Swedes for their support in the struggle against apartheid and to emphasise that poverty alleviation was post-apartheid South Africa’s priority. I stated that given the legacies of poverty, Sweden should not sell either Saab Gripens or submarines to South Africa which, as a result of militarisation during the apartheid era, was already over-armed relative to neighbouring states.

177.To my astonishment, there was uproar when radio talk shows took up the issue of corruption in the Swedish armaments industry. This was a highly sensitive subject in Sweden given the Bofors corruption scandal in India and, similarly, prospective exports of Saab Gripen fighter aircraft to South Africa were also highly controversial.

178.The Swedish Ambassador flew specially from Pretoria to protest to the Archbishop about my speech, which the Archbishop had in fact approved prior to my departure for Sweden.

179.Swedish TV1 then sent a team of investigative journalists to make a 40 minute television documentary, which was broadcast in September 1998. The point repeatedly made by several participants in the programme was that the offsets offered by arms suppliers were actually more important than the equipment itself.

180.Helmoed-Römer Heitman was asked: “Would you say that Sweden is taking advantage of South African goodwill, and is taking advantage of having supported the struggle against apartheid?” Heitman replied:

“Yes, the Swedish industry and government, especially the

government. The government sent a senior diplomat who was

involved in the sanctions campaign. That went down well with

politicians and the media. A pleasant little touch…Yes, offsets are

more important than the equipment itself.”

181.Armscor’s chairman, Ron Haywood declared:

“Let’s be honest. We’ll not have enough money. We need

innovative financing. This extra help [of offsets] justifies going to

Cabinet and saying let’s look at what we’re going to give the

country in return. If you come to me as a businessman with this

offer…I want to sell product x, and I will invest double. If I were a

businessman, given this offer, I’d have to say yes.”

182.In a Parliamentary briefing in August 1998, Mr Haywood had described offsets as “Madiba Magic! Where else can one spend R1 and get R4 back?”

183.Subsequently in October 2000, during the Scopa public hearings in Parliament into the Auditor General’s report, Mr Haywood declared:

“Denel’s joint ventures with the suppliers mean that Denel will

break even financially next year and will become a major supplier

in international markets. The British government has a

representative at the department of trade and industry to make sure

that the offsets work, and another representative from the Defence

Industry Services Organisation.”

184.His statement regarding the involvement of governments was confirmed by “Chippy” Shaik, who said:

“The package was government-to-government with tenders

provided by the respective embassies. There were government

commitments to the pricing structures, and also government

undertakings of responsibility to perform the offsets.”

185.Andrew Feinstein, as the lead ANC representative on Scopa, declared:

“We as a committee don’t deal with policy, but value for money

for public funds. Why don’t we spend most of our budgets on arms

in order to leverage economic development? It doesn’t make sense

to me as an economist. International literature suggests these

offsets are subsequently diluted or disappear, or the suppliers

factor the penalties into the costs. Why should South Africa be

different from international experience?

186.Shop stewards at the National Union of Metalworkers had informed me in December 1998 that BAE was laundering bribes of approximately R35 million to ANC politicians via two Swedish trade unions, but disguised as funding for an industrial training school.

187.My contacts at Swedish TV1 confirmed the payments, but could get no further. Accordingly, via Campaign Against Arms Trade in London, I requested the British government to investigate whether BAE was laundering bribes via Sweden to ANC politicians.

188.The then British Secretary For Trade and Industry, Stephen Byers instructed Scotland Yard to investigate. In due course, I learned that it was then not illegal in English law to bribe foreigners, and therefore there was no crime for Scotland Yard to investigate.

189.The affidavit by Mr Gary Murphy of the SFO places this into context:

“8. On 3rd December 1999 BAE signed a contract with the

Government of South Africa to supply Hawk trainer aircraft

and Gripen fighter jets (BAE having entered into a joint

venture with SAAB in 1995to sell the Gripen internationally

The price of both aircraft was stipulated in the contract as

US$2, 137, 443, 195, and the contract was part of the

strategic arms package negotiated by the South African

Government in 1999.

“9. UK bank statements obtained by the SFO have revealed

that BAE paid over £115 million to advisers in order to

assist in the securing and maintaining of the Hawk and

Gripen contract (a spreadsheet setting out payments up until

March 2007 is attached).

”11.The SFO investigation has revealed that BAE has

operated a system of ‘overt’ and ‘covert’ advisers in its

worldwide marketing efforts. ‘Overt’ advisers were publicly

declared by BAE; ‘covert’ advisers were not.

“12. During the 1990s BAE gave serious consideration to

concealing the system of payment to its ‘covert’ advisers.

One of the documents obtained from BAE by the SFO was a

report compiled by a US law firm (instructed by BAE) in

response to an investigation by the US Department of Justice

into BAE’s marketing activities in Chile.

“14. The same report states that in 1998 BAE set up a

nominee company called Red Diamond Trading Limited

(‘Red Diamond’) in the British Virgin Islands (BVI). Red

Diamond was subsequently used to enter into contractual

arrangements with ‘covert’ advisers.

“15. The following advisers had ‘covert’ agreements with

Red Diamond in relation to the South African Hawk and

Gripen contract.” (The following 12 pages of Mr Murphy’s

affidavit name those advisers and describe the

arrangements).

“17.I can confirm that whilst the Red Diamond system

was in operation, over £103 000 000 was paid to ‘covert’

advisers under the South African Hawk/Gripen campaign

from the Red Diamond UK accounts. The amount of money

paid directly by BAE to ‘overt’ advisers is approximately

£12 000 000.

“18.The internal BAE documents charting the genesis of

Red Diamond … also reveal that BAE executives wished to

keep details of the ‘covert’ contractual arrangements

offshore, despite having high security premises in the UK.

“19.By some point in 2001 BAE had made the decision to

no longer use Red Diamond. The SFO believes that this

decision stemmed in part from the imminent clarification of

UK law following the 1997 OECD Anti-Bribery Convention

(which from 14th February 2002 put beyond doubt that

bribery of foreign officials was an offence).

“54.In my experience in this investigation, I believe that a

reference to ‘third world procedures’ is a veiled reference to

the payment of bribes to ensure contract succ